Ironhorse Oil & Gas Inc. Recommends Rejection of Unsolicited Offer

Canada NewsWire

CALGARY, Nov. 19, 2015

CALGARY, Nov. 19, 2015 /CNW/ - Ironhorse Oil & Gas Inc. ("Ironhorse" or the "Company") (TSX-V:IOG), announces that its board of directors (the "Board") has unanimously recommended that Ironhorse shareholders REJECT the unsolicited offer from 1927297 Alberta Ltd. (the "Offeror"), a corporation wholly-owned by Timmerman Trust, commenced on November 4, 2015 to acquire the issued and outstanding common shares of Ironhorse ("Common Shares") at $0.17 per share in cash (the "Offer").

Reasons to Reject the Offer

The Board has carefully reviewed and considered the Offer with the benefit of advice from its financial and legal advisors. The following is a summary of the principal reasons for the unanimous recommendation of the Board to shareholders that they REJECT the Offer and NOT TENDER their Common Shares to the Offer.

1. The Offer is not supported by Ironhorse's largest shareholders or its directors and officers holding approximately 45% of the outstanding Common Shares.

The directors and officers of Ironhorse, together with a number of shareholders (including certain of Ironhorse's largest shareholders) have indicated to the Company that they intend to reject the Offer. Such persons hold approximately 45% of the outstanding Common Shares. According, management believes that the Offer is unlikely to succeed under its current conditions.

2. The Offer is highly conditional and has substantial completion risk.

The Offer is highly conditional and has substantial completion risk. In total, 12 conditions, several containing extensive sub-conditions, must be satisfied or waived before the Offeror is obligated to take-up and pay for any Common Shares deposited under the Offer. The conditions are for the exclusive benefit of the Offeror and may be asserted by the Offeror at any time regardless of the circumstances giving rise to any such assertion. The Board is concerned that, under the Offer, shareholders are being asked to tender their Common Shares into a highly conditional transaction without additional compensation for such risk. There are several conditions which are not subject to objective criteria, which effectively gives the Offeror sole and complete discretion as to whether or not to proceed with its Offer.

Among the conditions to the Offer is the condition that, together with Common Shares held by the Offeror and its affiliates, at least 66⅔% of the outstanding Common Shares shall have been deposited pursuant to the Offer. As stated in reason 1 above, shareholders holding approximately 45% of the outstanding Common Shares have indicated that they intend to reject the Offer. Accordingly, the Offer is subject to substantial completion risk as it is unlikely that all of the conditions to the Offer will be satisfied.

The Board believes that the unsolicited hostile Offer fails to adequately compensate shareholders for the value of Ironhorse's assets and growth potential and, if successful, would deprive shareholders of Ironhorse's upside potential. The Board of Directors has determined that the Offer is financially inadequate at current oil prices and is an opportunistic attempt by the Offeror to acquire Ironhorse, effectively using Ironhorse's own cash, at a low point in the energy cycle when Ironhorse has no debt and significant value appreciation with any oil price recovery.

As at June 30, 2015, Ironhorse had $3.0 million of net working capital on its balance sheet with no debt. Based on the offer price of $0.17 per Common Share, the Offer attributes only $1.7 million in value to the Company's oil and gas assets, notwithstanding average daily production (Company's share) of 215 bbl/d light oil and natural gas liquids and 233 mcf/d natural gas in the quarter ended June 30, 2015. This not only significantly undervalues the intrinsic production and reserves value of Ironhorse's high quality oil and gas assets but deprives shareholders of the opportunity to participate in the upside potential of Ironhorse's assets upon a recovery in commodity prices.

As at December 31, 2014, Ironhorse's aggregate petroleum and natural gas reserves and before tax net present value of future net revenue from those reserves discounted at 10% ("NPV10") as evaluated by the Company's independent reserves evaluators were as follows:

Proved developed producing (PDP) reserves of 556 Mboe with an NPV10 of $12.65 million;

Ironhorse's well and facility capabilities are 390 boe/d. The cost per flowing barrel of the Offer, based on capability is therefore only approximately $4,350, which is significantly lower than comparable transactional values.

4. The Offer is predatory and opportunistic.

The Offer has been opportunistically made at a time when the Common Share price has been materially adversely affected by the significant and prolonged decline in the price of oil and gas. The Offer exploits this recent period of decline in the Common Share price, making the Offer premium as advertised by the Offeror to the Shareholders inadequate. The Common Shares were trading near their three year low immediately prior to the announcement of the Offer and, in any event, the trading price is not representative of the en bloc value of the Common Shares in these circumstances. Further, the Offer takes advantage of the current climate of regulatory and political uncertainty impacting oil and gas companies with operations in Alberta, including in relation to the Government of Alberta's anticipated changes to the Province's oil and gas royalty regime, with the recommendations of the Royalty Review Panel expected to be announced in December 2015.

The Offeror suggests that a reduction in the stated value of Ironhorse's reserves to be filed for the year ended December 31, 2015 as a result of the decline in oil prices could be expected to cause a decrease in the price of the Common Shares. However, the impact of the drop in oil and gas prices has already been reflected in the Common Share price and the Offeror's insinuation that the Common Share price will decline following release of the Company's December 31, 2015 reserves figures is simply predatory unfounded speculation. The Board believes that the Offer is significantly undervalued at current oil prices having considered any potential decrease in the net present value of reserves as at December 31, 2015.

5. Superior proposals or other alternatives may emerge.

A special committee of the Board of Directors (the "Special Committee") is currently working, together with Ironhorse's management, directors and advisors to evaluate a range of strategic alternatives that may enhance Shareholder value. The Board of Directors believes that Ironhorse and its assets are potentially attractive to other parties in addition to the Offeror. Alternatives may include, among other things, a sale of the Company for cash and/or shares, asset sales(s), a merger, a reorganization or partnering with a financial or strategic investor. As of the date of this Directors' Circular, it is premature to predict whether any transaction will emerge from these efforts.

Tendering Common Shares into the Offer before the Special Committee has had an opportunity to fully explore all available alternatives to the Offer may preclude the possibility of a financially superior alternative transaction emerging.

6. Ironhorse's financial advisor has delivered a written opinion that the Offer is inadequate.

Peters & Co. Limited, the financial advisor to Ironhorse, has delivered a written opinion to the Board that the consideration offered under the Offer is inadequate, from a financial point of view, to shareholders.

7. The Offer provides insufficient time to properly consider any take-over bid made for Ironhorse.

The Offer provides insufficient time to properly consider any take-over bid made for Ironhorse and to allow time for competing bids and alternative transactions to emerge from potential buyers.

Since the Offer is only open for acceptance for 44 days, it is not a "Permitted Bid" under the Shareholder Rights Plan adopted by the Company, and the Offeror has chosen not to amend its bid to become a Permitted Bid since Ironhorse announced its Shareholder Rights Plan. The Shareholder Rights Plan is consistent with amendments to the Canadian take-over bid rules proposed by the Canadian securities regulators to increase the minimum amount of time that a take-over bid must remain open to 120 days.

Directors' Circular

A directors' circular of Ironhorse dated November 19, 2015 (the "Directors' Circular") in response to the Offer has been mailed to each of Ironhorse's shareholders in compliance with applicable securities laws and filed with Canadian securities regulatory authorities. The Directors' Circular is available on SEDAR at www.sedar.com. Shareholders are advised to read the Directors' Circular carefully and in its entirety, as it contains important information regarding Ironhorse and the Offer.

If shareholders of Ironhorse have any questions or require more information, they are encouraged to contact D.F. King Canada ("D.F. King"), a division of CST Investor Services Inc., the information agent retained by Ironhorse, by telephone at 1-800-294-3174 (Toll Free in North America) or 1-201-806-7301 (Banks, Brokers and Collect Calls), or by email at [email protected].

How to REJECT the Offer and Withdraw Tendered Shares

To reject the Offer, you should do nothing. The Offer is open for acceptance until December 18, 2015, unless extended. Shareholders who have already tendered their Common Shares to the Offer can withdraw them at any time before they have been taken up by the Offeror and in certain other circumstances as further described under the heading "How to Withdrawn Your Deposited Common Shares" in the Directors' Circular. Shareholders holding shares through a dealer, broker or other nominee should contact such dealer, broker or nominee to withdraw their Common Shares. Shareholders may also contact D.F. King by telephone at 1-800-294-3174 (Toll Free in North America) or 1-201-806-7301 (Banks, Brokers and Collect Calls), or by email at [email protected].

If you have already tendered Common Shares to the Offer and you decide to withdraw these Common Shares from the Offer, you must allow sufficient time to complete the withdrawal process prior to the expiry of the Offer.

Advisories

Forward-Looking Statements

This news release, including the discussion of the reasons for the Board's unanimous recommendation that shareholders reject the Offer and not tender their Common Shares, contains forward-looking information (as defined in the Securities Act (Alberta)) and statements (collectively, "forward-looking statements") that are based on expectations, estimates and projections as of the date of this news release. These forward-looking statements can often, but not always, be identified by the use of forward-looking terminology such as "plans", "predicts", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases, or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Examples of such forward-looking statements in this news release include, but are not limited to, the quantity of reserves; future trading prices of the Common Shares; future commodity prices; and whether or not an alternative transaction superior to the Offer may emerge. Statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Forward-looking statements contained in this news release are based on a number of assumptions that may prove to be incorrect, including, but not limited to assumptions as to production, operating expenses, capital expenditures and oil prices; competitive conditions in the oil and gas industry; general economic conditions; changes in laws, rules and regulations applicable to Ironhorse; estimates of reserves; and whether or not an alternative transaction superior to the Offer may emerge. In addition to being subject to a number of assumptions, forward-looking statements in this news release involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to: volatility of crude oil and natural gas prices; the impacts of legislative and regulatory changes especially those which relate to royalties, taxation and the environment; various events which could disrupt operations; operational issues and contractual issues; uncertainty of estimates with respect to reserves; the supply and demand metrics for oil and natural gas; the variances of stock market activities generally; currency and interest rate fluctuations; Ironhorse's inability to either generate sufficient cash flow from operations to meet its current and future obligations or obtain external sources of debt and equity capital; general economic, business and market conditions; and such other risks and uncertainties identified in the filings by Ironhorse with the Canadian provincial securities regulatory authorities. The Board believes that the expectations reflected in the forward-looking statements contained in this news release are reasonable as at the date hereof, but no assurance can be given that these expectations will prove to be correct. In addition, although Ironhorse and the Board have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Accordingly, you should not place undue reliance on any forward-looking statements contained in this news release. Except as required by law, neither the Board nor Ironhorse undertakes any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Oil and Gas Advisories

Readers are cautioned that estimated values of future net revenue contained in this news release do not represent the fair market value of reserves. This news release makes reference to barrels of oil equivalent (boe). Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 mcf of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

EIA predicts U.S. gas production will grow by nearly 1 Bcf/d in one month EnerCom’s Effective Rig Count rose sharply last month, as improving efficiencies combined with a jump in active rigs. The Effective Rig Count now stands at 2,670, meaning it would take 2,670 rigs from January 2014 to yield the same production as current operations are achieving. Current[Read More…]